Category: Daily News

The Uber business model is pretty simple: People use the ride-hailing app to find a driver to take them where they want to go for a price. But is that driver an Uber employee or an independent contractor? The Los Angeles Times reports that the California Labor Commissioner’s office has ruled that San Francisco Uber driver Barbara Ann Berwick was an employee – and entitled to receive more than $4,000 in mileage and toll expenses because her services were “integral” to the company’s business model. Without drivers, Uber’s business “would not exist,” the order concluded.

The decision – handed down earlier this month and appealed on Tuesday by Uber – could disrupt the Silicon Valley start-ups that have redefined the relationship between companies and workers. The case could spawn other legal challenges from workers and regulations from cities and states. If the case winds up before the California Supreme Court, it could lead to a broader, precedent-setting ruling.

Uber connects drivers and passengers through a smartphone app, much in the same way that Airbnb digitally connects property owners and short-term renters. Both companies, and others like them, have faced a series of political battles in states and cities struggling to regulate such fast-growing enterprises, which are upending business models – and often drawing protests.

Uber has grown more than sixfold over the last five years – it now operates in more than 150 U.S. cities and 57 countries around the world. The company has raised more than $5.9 billion from investors, putting Uber at a $41-billion valuation, above General Motors and Ford, and the highest-valued start-up in the U.S. Those high valuations, however, could be threatened by a rising tide of legal and regulatory challenges across the globe. In March, a federal judge gave the go-ahead to a class-action lawsuit in federal court in San Francisco involving drivers who argue that they are employees entitled to benefits such as unemployment insurance, workers’ compensation and healthcare.

Uber has contended that it offers its drivers the freedom to choose how often and when to work, meaning the traditional employer-employee relationship does not apply. “It’s important to remember that the No. 1 reason drivers choose to use Uber is because they have complete flexibility and control,” the company said in a statement Wednesday responding to the Labor Commissioner’s ruling. The company also said the decision contradicted a 2012 ruling in which the office concluded that a driver had performed services as a contractor and “not as a bona-fide employee.”

The most recent order found that Uber was involved in “every aspect of the operation,” including vetting drivers, requiring them to provide personal banking, Social Security and address information, conducting DMV and background checks, and only allowing drivers to use registered cars that are less than 10 years old. Uber requires drivers to pay expenses. Unlike many taxi or limousine services, Uber doesn’t directly employ drivers, nor does it own or maintain the vehicles used by the drivers.

Classifying drivers as employees would be costly for Uber. In California, for example, the company would have to reimburse employees for gas, tolls and insurance and would also be on the hook for unemployment insurance, workers’ compensation, Social Security and other benefits.

The classification of “independent contractor” versus “employee” has been a long-standing source of conflict in U.S. labor law, ranging from port truck drivers to janitors to delivery drivers. But in recent years, the debate has shifted into the high-tech start-up realm, where companies have worked to develop applications connecting workers who supply services and customers who demand them.

It is not uncommon for seriously injured workers to be awarded home health care services by the WCAB. In some cases the claim is for services 24 hours a day. It is similarly not uncommon for the employer to meet this obligation by payment for services to a spouse or family member of the injured worker. It is unfortunately very uncommon for employment law issues such as wage hour and meal breaks and overtime pay to be included in this arrangement with the family member, or for that matter, a clear understanding of who exactly the caregiver’s employer might be. Lurking in the background is a supplemental claim for back pay and penalties as illustrated by this announcement by the California Labor Commissioner.

California Labor Commissioner Julie A. Su awarded $138,386 in back pay to a caregiver who worked 16-hour days in San Francisco for less than minimum wage, usually without a day off. The amount includes minimum wage and severance pay violations, liquidated damages and waiting time penalties.

Francisca Vasquez, a Salvadoran war refugee, was hired in 1992 by siblings Magdalena Lindvall and Reynaldo Peña Jr. to work as a companion for their elderly parents for $400 a month. Eventually Vasquez became a housekeeper and then round-the-clock caregiver to their mother for $500 a month. Upon the mother’s death, Vasquez was discharged.

“Workers are not always aware of their rights,” said Christine Baker, Director of the Department of Industrial Relations (DIR). “California labor law protects domestic workers as well as others who work in industries susceptible to wage theft.” The Labor Commissioner’s Office, also known as the Division of Labor Standards Enforcement (DLSE), is a division within DIR.

Because Vasquez filed her claim two years into the three year statute of limitation for minimum wage claims, she could only collect wages on the last year she worked.

“This was an egregious case of worker abuse, where someone providing care was treated with an utter lack of care for her rights and for her humanity,” said Labor Commissioner Julie A. Su. “I am pleased that through the Berman wage claim process, my office was able to help her get some of the hard earned wages she deserved. This is a sign that when workers come forward to file wage claims, they can win some measure of justice.”

The Labor Commissioner awarded her $50,008 for wages, $48,209 in liquidated damages, $35,707 in interest, and $4,464 in penalties. Vasquez was assisted in the wage claim process by the community organization Mujeres Unidas y Activas and the Legal Aid Society – Employment Law Center.

There is no clear solution that would apply generically across worker’s compensation cases to minimize risk in home health care situations where a family member becomes the paid caregiver. It would be prudent to consult an employment law attorney, such as Bernadette O’Brien at Floyd, Skeren and Kelly should there be concerns about what this risk might be, or how it might be mitigated.

In a four-month investigation, Reuters has documented the full extent of the fraud in India’s medical-education system. The stunning report concludes that “India’s system for training doctors is broken. It is plagued by rampant fraud and unprofessional teaching practices, exacerbating the public health challenge facing this fast-growing but still poor nation of about 1.25 billion people. The ramifications spread beyond the country’s borders: India is the world’s largest exporter of doctors, with about 47,000 currently practicing in the United States and about 25,000 in the United Kingdom.”

The Reuters probe also found that recruiting companies routinely provide medical colleges with doctors to pose as full-time faculty members to pass government inspections. To demonstrate that teaching hospitals have enough patients to provide students with clinical experience, colleges round up healthy people to pretend they are sick. Government records show that since 2010, at least 69 Indian medical colleges and teaching hospitals have been accused of such transgressions or other significant failings, including rigging entrance exams or accepting bribes to admit students. Two dozen of the schools have been recommended for outright closure by the regulator. Paying bribes – often in the guise of “donations” – to gain admission to Indian medical schools is widespread, according to India’s health ministry, doctors and college officials.

“The next generation of doctors is being taught to cheat and deceive before they even enter the classroom,” said Dr. Anand Rai. He exposed a massive cheating ring involving medical school entrance exams in the central Indian state of Madhya Pradesh in 2013. Rai was given police protection after he received death threats following the bust.

Charged with maintaining “excellence in medical education” is the Medical Council of India (MCI). But this government body is itself mired in controversy. Its prior president currently faces bribery allegations. The council is the subject of a mountain of lawsuits, many of them pitting it against medical schools challenging its findings. The cases often drag on for years.

“The best medical schools in India are absolutely world class,” said David Gordon, president of the World Federation for Medical Education. But, he added, the Indian government’s process of accrediting a “huge” number of recently opened, private medical schools “has at times been highly dubious.” Sujatha Rao, who served as India’s health secretary from 2009 to 2010, said “The market has been flooded with doctors so poorly trained they are little better than quacks,”

The system’s problems are felt abroad, too. Tens of thousands of India’s medical graduates practice overseas, particularly in the United States, Britain, Australia and Canada. All of these countries require additional training before graduates of Indian medical schools can practice, and the vast majority of the doctors have unblemished records. But regulatory documents show that in both Britain and Australia, more graduates of Indian medical schools lost their right to practice medicine in the past five years than did doctors from any other foreign country.

About 45 percent of the people in India who practice medicine have no formal training, according to the Indian Medical Association. These 700,000 unqualified doctors have been found practicing at some of India’s biggest hospitals, giving diagnoses, prescribing medicines and even conducting surgery. Balwant Rai Arora, a Delhi resident in his 90s, said in an interview that he issued more than 50,000 fake medical degrees from his home until his forgery ring was broken up by the police in 2011. Each buyer paid about $100 for a degree from fictitious colleges. Arora was twice convicted and jailed for forgery. “There is a shortage of doctors in India. I am just helping people with some medical experience get jobs,” said Arora. “I haven’t done anything wrong.”

Liberty Mutual Insurance, once the country’s biggest provider of workers’ compensation insurance, is pulling back from the comp market, according to the article in the Boston Globe, as its profits get squeezed by increasing medical costs and changing state regulations.The Boston company, which got its start a century ago insuring railway, shipbuilding, and tannery workers hurt on the job, has slipped to No. 4 by premiums since 2012. Its annual workers’ comp premiums dropped by more than a third to $2.7 billion in 2014 from $4.2 billion three years earlier. The insurer – first known as the Massachusetts Employees’ Insurance Association – also has sold off some of its workers’ compensation subsidiaries and paid Warren Buffett’s Berkshire Hathaway Inc. to take over some of its claims.

Liberty Mutual officials said the company will remain a large player in the market, but is focusing on growing more profitable portions of its business, such as safety consulting and managing the claims and paperwork for companies that insure themselves for workers’ comp.

Liberty Mutual’s overall profits have grown since it began reducing its cutting its workers’ comp business three years ago. In 2011, the insurer earned $284 million. That rose to $829 million in 2012, $1.7 billion in 2013, and $1.8 billion last year, according to the company’s annual reports.

The company, which is owned by its policyholders, does not disclose profits for its workers’ comp business.

In 2012, Liberty Mutual sold its workers’ compensation business in Argentina. Last year, it shed Summit Holdings Southeast Inc., which was solely a workers compensation subsidiary. A few months later, Liberty Mutual announced that it would pay a Berkshire Hathaway company $3 billion to take over some of its workers’ compensation claims, along with liability tied to asbestos and environmental policies.The deal freed Liberty Mutual to spend its money on other projects and investments, instead of having to set aside money for long-term workplace injury claims.

Some insurers, however, remain optimistic about workers’ compensation, analysts said. The combination of recent state rate increases and more sophisticated data and technology to control costs, especially medical expenses, provides the potential to boost profits, they said.

The Travelers Cos. of St. Paul, Minn. has increased its share of the workers’ comp market and surpassed Liberty Mutual. Companies that were smaller players several years ago, such as Berkshire Hathaway and American Financial Group Inc. of Ohio, also have grabbed more of the market.

Liberty Mutual has tended to pay out a larger percentage of its workers’ comp premiums in claims than the industry average, leading to shrinking profits in that business. In 2012, 89 percent of workers’ comp premiums collected by Liberty Mutual were paid out to claims, compared with 68 percent industry-wide, according to the National Association of Insurance Commissioners.

Bob Hartwig, president of the Insurance Information Institute, a New York-based industry research group, said Liberty Mutual’s withdrawal from workers’ compensation hasn’t disrupted the market yet. There are still hundreds of companies that offer workers compensation insurance at competitive prices, he said. “There are always insurers changing their strategic emphasis,” Hartwig said.

Doctors must be careful to avoid entering into payment agreements that could violate the anti-kickback statute, HHS’ Office of Inspector General warned in a fraud alert Tuesday that follows a dozen recent settlements involving physician contracts. The alert could signify that the feds are increasingly pursuing allegations against individual doctors, as opposed to just the hospitals and other organizations that pay them. Or it could be a way to remind physicians that they, too, are accountable for arrangements that skirt the law, experts say. It also serves as an a guide for workers’ compensation administrators on detection of masked or hidden illegal kickback schemes.

The alert warns doctors entering into payment arrangements, such as medical directorships, that their compensation must reflect fair market value for services provided. It’s common for doctors to be employed by hospitals and other organizations as medical directors, but those arrangements might violate the anti-kickback law when their purpose is to get more referrals from those doctors.

Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of federal healthcare program business, OIG encourages physicians to carefully consider the terms and conditions of medical directorships and other compensation arrangements before entering into them.

The new alert is the third in three years involving physicians. In 2013, the OIG issued a fraud alert about physician-owned device distributorships, and in 2014 it issued a fraud alert about lab payments to physicians.

The OIG has reached settlements recently with 12 individual physicians who entered into “questionable” medical directorship and office staff arrangements, the agency said. In those cases, the government alleged that payments to physicians took into account the volume or value of their referrals or did not reflect fair-market value, or that the doctors did not actually provide the services outlined in their agreements. In some cases, the OIG alleged that doctors entered into agreements in which an affiliated healthcare entity paid the salaries of their office staff.

Those who commit fraud involving Federal health care programs are subject to possible criminal, civil, and administrative sanctions. For more information on physician relationships, see OIG’s”Compliance Program Guidance for Individual and Small Group Physician Practices” and OIG’s “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse.”